Gafisa Soars on Report Alphaville Deal Imminent: Sao Paulo Mover

Gafisa SA, the Brazilian homebuilder, rallied to a two-week high as the newspaper Valor Economico reported that it may sell its Alphaville unit in early June.

The shares jumped 2.5 percent to 4.08 reais at the close of trading in Sao Paulo, the highest level since May 10. Trading volume was 1.8 times the three-month daily average. The stock was the best performer on the Ibovespa, which sank 2.5 percent.

The Sao Paulo-based company will decide on Alphaville in the first half of June, Valor reported, citing a person it didn’t identify. The newspaper said a deal may value the company at about 2.1 billion reais ($996 million). Gafisa’s market capitalization is 1.8 billion reais, according to data compiled by Bloomberg.

“The main driver for Gafisa is that it may be getting favorable valuations for the possible Alphaville sale,” Javier Gayol, an analyst at Corporativo GBM SAB in Mexico City, said in a telephone interview. “It’s by far the best-performing asset in the business and understandably the one that’s most appealing. It would bring in the much-needed cash.”

Gafisa said in its first-quarter earnings report on May 10 that it was analyzing “strategic options” for its Alphaville business, including the sale of a stake or an initial public offering. A press official for Gafisa declined to comment on its plans for Alphaville when contacted by Bloomberg News today.

“We want to make the best decision possible regarding value generation for our shareholders,” Alceu Duilio Calciolari, Gafisa’s chief executive officer, said on a May 13 conference call. While the company was in “no hurry,” the decision will probably be made this year, he said.

Home Demand

The homebuilder’s results have missed analysts’ estimates in the past two quarters as it has backed away from projects that are meant for low-income families and subsidized by the government after it overestimated demand and built inexpensive houses faster than it could sell them.

Alphaville builds higher-priced houses and apartments and accounted for 24 percent of Gafisa’s first-quarter revenue. The unit was the part of the business generating profit, Calciolari said on the conference call, while Tenda, the company’s low-income unit, was still “consuming results.”

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